Dogs, doggy, scooby doo. They are cute and mean. The are lovable and smell. They keep us mentally healthy but need a lot from us. They shit and pee. I have a doggy. She shits and pees all the time. When they are young sometimes they poo and pee on you! On a rental property its a gamble, a crap shoot, a roll of the dice. Should I accept a doggy or not? Continue reading “Dogs: A Landlord’s Perspective”
Every month or so I track my net worth. I go through all my assets with value and subtract it by all my liabilities. Usually I would do it on a notebook I have full of strange ideas and realistic goals. Now that I have this blog….I will be doing it here. Here we go: Continue reading “Multimillionaire Journey: Net Worth 1”
Insecurity is when you are not feeling up to snuff, not good enough, lacking in some way. We all have it. Believe it or not, those insecurities has helped humanity build, invent, and capitalize. It has helped built skyscrapers. The Great Pyramids. The billionaire. The car. The airplane. Cures for diseases. In a nutshell, it is what makes people wake up every morning. Insecurity makes you care. Continue reading “Motivation: A Twist on Insecurity”
My credit car bills are too damn high! If you have read my blog articles Credit Cards: Leveraging the Right Way and Bought a Bargain Property: Now What?, then you know I used many credit cards to pay for a remodel on the new property purchased. My wife and I decided to move into the property and lease out our old home. The remodel took a bit of life from me but we pulled through but now we have to pay this darn debt. A month ago it was $70,000 on credit cards! Yikes! This is not helping my Multimillionaire Journey at all.
I have come across several residential investors throughout my time in real estate. Below are a few of the people I have met and their methods!
The Owner Occupied String Method
Before purchasing my first property I was simply dropping in on open houses as a lookie loo. Every time I would see a sign I would stop my car and go inside to talk to the realtors there. One day I was chauffeuring my parents to their friends house across town when I saw an Open House sign. Without thinking twice I stopped to take a look inside. Continue reading “Investment Tip 2: A Few Methods for Buying More Property”
Why be a slumlord? Because it’s very easy. The less you do on a rental property the less money you spend, the more short term money you get, and the less time you spend on the property. That sounds great in the short term but then you end up with a tear down. I am not a slumlord. That means I spend more money, get less money on a short term basis, and spend more time on the properties. I don’t want future tear downs. These last few months I had to prepare 4 vacancies for rent, three in the last 3 weeks, and many repairs also popped up. I have been swamped because I do most of the preparation and repairs myself. That has given me little time to write on this blog.
About a week ago I was installing a built-in microwave that went bad and thought to myself how much I would be charged to outsource that job. My guess would be about $150. Then I thought about all the other stuff I had done to get that property ready for lease and its probable cost if I had outsourced the labor. Below is the breakdown:
Install Microwave: $150 labor; $400 for microwave
Paint 3 bedrooms, 1 Hallway, 1 bath, plus baseboards: $1200 labor; $150 for materials/paint
Caulk baseboards and ceilings on about half the house: $300 labor; $30 in caulk tubes
Take out large Mirror and replace with double single mirrors: $150 labor; $70 new mirrors
Clean Gutters: $100
Mow and edge lawn (big yard): $70
Paint and install all door knob hardware: $150 labor; $7 in paint
Applying Tile Sealant on all tile: $200 labor; $60 for sealant
Replace old faulty toilet: $150; $110 new toilet
Paint all closets and pantry: $400; $30 for paint
Change out faulty exhaust fan motor and light switch: $200; $20 for fan and switch
Patch large cracks with cement on front porch steps: $80
Fix Garage door sensors: $100
All together we have a grand total of $3250 for labor that would have been spent to get the property ready. But wait there is more. I outsourced professional cleaning at $160 and carpet steam clean at $165. The carpet despite the steam clean still showed many stains so I opted to install new carpet for 3 rooms at $1050. All in all if I outsourced all the work done I would have been spending about $4625, plus materials of about $877, for an ultimate grand total of $5502! Geez…why even go into the real estate rental business? Well, as for me I saved about $3250 by doing all that work myself but did I really save? I spent so much time on all day weekends and late evenings trying to get things done. I have to wonder?
And this is just one vacancy. Now imagine the time and money spent on the others. Now granted not all vacancies are so labor/cost intensive, some less, some more. But all eventually will be as intense or even more intense when bathrooms and kitchens need updating. No wonder we have slumlords.
I imagine some landlords who have to outsource all the labor, attempt to do the minimum and not fix faulty items because of the high costs. They may not have the money or do not want to spend the money. In a few years, one day they look in the mirror only to find out that they have become slumlords. Then they may hide behind management companies. The management companies hold the burden of all the complaints but can not do anything unless the landlord offers money to correct an issue. The management company has a list of excuses why a problem can not be corrected or they lie and say it will be corrected but never do.
I just gathered all my information to do my taxes. That is the only place I see some type of relief for all the work and expenses done on all the properties. All repairs are deducted from our taxable income which is an added help during tax time. Maybe it’s not so bad being a landlord afterall. Maybe.
There are big ticket stuff like two years ago when I spent $14,000 on new siding on another property. Then there are the small costs here and there that add up to big numbers. I have boxes full of receipts. I have a contractor account at Home Depot and Lowes. Sometimes my clothes are covered with paint, grime, and dirt. My van is full of tools and debris. I take calls and correct problems on a constant basis. I do not hide behind management companies but sometimes I wonder if I should? Everybody thinks its easy. I say its not and they don’t believe me. Being a slumlord is easier. I am not one of those.
Debt is bad. But not always. In another blog post I discussed how I purchased a bargain property titled Bought a Bargain Property: Now What? using Investment Tip 1: Types of Bargain Properties. At first, I attempted to get a line of credit from my home to fund all my remodeling expenses for the new property. I got rejected. Not just once. Including the combined attempts by my wife and I, we got rejected a total of 7 times by different banks!!! We didn’t get rejected because we have bad credit. The reasons stemmed from income being too low or having too many loans on our properties. What saved the day? Credit cards.
If there is one thing I learned in life is that credit cards are not that bad even though yearly interest rates hover around 10%-25% for most cards. And there are beneficial methods to the madness of credit cards. But it has to be done the right way! I will go over the why and how below:
Cashback Credit Cards
Credit cards pay me just for using them. Yes, no kidding! With my two rewards credit cards, the credit card companies PAY ME a total of about $600 to $1500 per year! If I include my wife’s returns from her credit card it is even more! Below is what I have earned so far in the past 7 months or so:
How does this work? Is there a method to the madness? Yes and here we go! Step one is to first acquire a credit card that offers the cashback option which are typically called Cash Rewards Credit Cards. And there are plenty online and at your local bank. Most Cash Rewards Credit Cards reward you 1%-3% of the amounts used depending on the purchase and terms of service. Step two is to use those credit cards for ALL your expenses and purchases whenever possible. This includes groceries, bills, gas, and more! Last step is the most important because this is how you make your money. Pay your credit cards before the credit card companies charge you interest. There is usually a grace period of about 21 days. Which means that if you pay before then, you get charged nothing, zero, nada! But guess what? The credit card companies now pays you! If the credit card is from the same bank from your checking account sometimes they give you even MORE money–up to 50% of your rewards amount! However, you must redeem your amount via transfer to your checking account instead of getting a check or immediate cash. That means if I was to redeem my $892 rewards by way of transfer to my checking account, the bank/credit card company will give me $446 more on top of the $892 already earned! A total of $1338! Is this madness? If it is, I am liking it.
Why do credit cards do this? The credit card companies are betting that you don’t pay them back on time and keep a balance on the card. The typical charge rate (about 10%-25%) is way higher than the rewards rate of only about 1%-3%. So if you hold a debt throughout the year, even if they give you 3% in rewards, they still make money because the charge rate will be 7-10 times higher. Also, when you don’t consistently pay within the 21 day window they charge you interest and their chances to make money increases. But if you pay before the charge window every time and do it the right way, you are the winner!
Cash Advance and Credit Card Limits
Cash Advance is having the option of drawing out a portion of your credit limit in CASH. Most credit cards have a cash advance option which is a little different from your credit card limit. Your credit card limit is the maximum amount you can use. Then you have a Cash Advance limit which is usually lower than the overall limit or equal to it. The interest rates for both are also different. For example, your credit card limit could be at 5000 at 12% and have a Cash Advance option of $1000 at 20% on the same card. Cash Advance interest rates are usually higher.
Many people think that having a high credit card limit is bad. It is not. Having very high credit card limits are beneficial in two ways. One, your credit score will go up when your debt ratio is low compared to your limit. As an example, if you have a limit of 5000 and owe $5000 you have reached your limit. Your debt to limit ratio will be high at 1/1 or at 100% which will affect your credit score negatively. Now let’s say your limit is at 25,000 and still owe the same amount of $5000. Now you are using just 1/5th of your limit, or only 20% of your limit as opposed to 100%. Your ratio is now considered low boosting up your credit score! Same debt, yet different results for your credit score!
How do you get a higher credit limit? Below are the steps:
Step 1: Call the customer service number on the back of your credit card.
Step 2: Say “I would like to request a higher credit card limit.”
Step 3: They will then ask you for the amount you want. I recommend you request double whatever your current limit is. For example if you currently have a 5000 limit ask for 10,000.
Step 4: They will then ask you for your current income, rent/mortgage information, and other minor information. They don’t verify this information. It is all verbatim. They are expecting you to be truthful in your discourse.
Step 4: They will run this information through a computer. There is a waiting period of about 5 minutes in most cases. Sometimes you will get what you requested and sometimes they come back with a different amount, usually higher than your current limit but lower than what was requested. Either way, your credit card limit is higher than before!
Step 5: Call every other month and do the same thing. Soon you will have limits that are very high. I have combined limits of about 70,000 spread out through my credit cards as an example.
How do you get a higher Cash Advance limit? Just follow the same steps except you request a higher Cash Advance limit. In fact, you could request higher limits for both at the same time. That is what I do for practicality.
Using the Cash Advance Option
The Cash Advance option is awesome to have! You will never know when you might need CASH. There are medical emergencies, death in the family, taxes due, property purchases, or in my case, for a remodeling project. But again, there is a method to getting the best deal on these advances.
Never accept the standard rate given for Cash Advances. Currently on one of my credit cards I have an interest rate of 18% if I draw out CASH. That is a lot of interest per year I will be paying, especially if I am drawing a large amount. What you do instead is call the number on the back of the credit card and ask for special promotions. They are usually way way better. The credit card companies equip the customer service representatives with these promotions to entice callers to draw out credit. Usually, people deny these requests because they don’t need or want it. What happens when you do want it? Well you call and find out what they can offer?
My Scenario with Cash Advance from a Credit Card
Again, I have an 18% rate if I draw out cash on that one credit card. I called the number on the back and asked for promotions for drawing out $20,000 in CASH. They put me on hold. The representative came back and offered me a draw out fee of 3% with no interest charged for an entire year! That means I am paying only 3%, which is the rate of inflation, on the money borrowed compared to the 18% if I didn’t call! Of course, after the year is up I will be paying the going rate of 18% but I have one whole year to pay it all back. I drew out a combined $60,000 CASH with the same 3% draw out fee from three credit cards for the remodel. I have one year to pay it all back before the high interest kicks in and that is the goal. The numbers have been run and it could be done.
To sum it all up, credit cards are not so bad. There is some method to the credit card madness.